SHOPPING AROUND FOR A MORTGAGE?
HERE'S THE INSIDE SCOOP ON HOW TO DO IT RIGHT!
First and foremost: make sure you are working with an experienced, professional lender. The largest financial transaction of your life is far too important to place into the hands of someone who is not capable of advising you properly and troubleshooting the issues that may arise along the way.
But how can you tell?
Here are FOUR SIMPLE QUESTIONS YOUR LENDER ABSOLUTELY MUST BE ABLE TO ANSWER CORRECTLY. IF THEY DO NOT KNOW THE ANSWERS... RUN... DON'T WALK... RUN... TO A LENDER THAT DOES!
1) What are mortgage interest rates based on?
(The only correct answer is Mortgage Backed Securities or Mortgage Bonds, NOT the Fed or the 10-year Treasury Note. While the 10-year Treasury Note sometimes trends in the same direction as Mortgage Bonds, it is not unusual to see them move in completely opposite directions. DO NOT work with a lender who has their eyes on the wrong indicators.) To read a great article explaining exactly why you want to make sure your mortgage professional is following the right indicator Click Here.
2) What is the next Economic Report or event that could cause interest rate movement?
(A professional lender will have this at their fingertips. To receive an up-to-date weekly calendar of weekly economic reports and events that may cause rates to fluctuate, contact a CMPS professional today.)
3) When Bernanke and the Fed "change rates", what does this mean... and what impact does this have on mortgage interest rates?
(The answer may surprise you. When the Fed makes a move, they are changing a rate called the "Fed Funds Rate". This is a very short-term rate that impacts credit cards, credit lines, auto loans and the like. Mortgage rates most often will actually move in the opposite direction as the Fed change, due to the dynamics within the financial markets. For more information and explanation, Click Here.)
4) What is happening in the market today and what do you see in the near future?
(If a lender cannot explain how Mortgage Bonds and interest rates are moving at the present time, as well as what is coming up in the near future, you are talking with someone who is still reading last week's newspaper, and probably not a professional with whom to entrust your home mortgage financing. To get a break down of the upcoming economic event calendar and what impact the events may have on mortgage rates, give us a call at 949-600-5340 x401)
Be smart... Ask questions... Get answers!
More than likely, this is one of the largest and most important financial transactions you will ever make. You might do this only four or five times in your entire life... but CMPS professionals do this every single day. It's your home and your future. It's our profession and our passion. We're ready to work for your best interest.
Shopping Around? (Part II) HERE’S HOW TO CONTINUE DOING IT RIGHT!
Once you are satisfied you are working with a top-quality mortgage advisor, here are the rules and secrets you must know to “shop” effectively.
1) IF IT SEEMS TOO GOOD TO BE TRUE, IT PROBABLY IS
But you didn’t really need us to tell you that did you? Mortgage money and interest rates pretty much come from the same places, and if something sounds really unbelievable, better ask a few more questions and find the hook. Is there a prepayment penalty? If the rate seems incredible, are there extra fees? What is the length of the lock-in? If fees are discounted, is it built into a higher interest rate? To read an interesting article about "Incredible Low Rate Deals" Click Here.
2) YOU GET WHAT YOU PAY FOR
If you are looking for the cheapest deal out there, understand you are placing a monumentally important process into the hands of the lowest bidder. There is no free lunch. Best case; expect very little advice, experience or personal service. Worst case: a turbulent process, your loan may not close on time or close at all. You won’t know until it’s too late that cheapest isn’t BEST, if you want the cheapest quote – head on out farther on the Internet, and good luck.
If you’ve heard horror stories from family members, friends or coworkers about missed closing dates, or surprise changes at the last minute on interest rate or costs…these are often due to working with discount or internet lenders who may have a serious lack of experience or ethics. Most importantly, remember that the cheapest rate on the wrong strategy will cost you thousands more in the long run. This is the largest financial transaction most people will make in their lifetime. That being said – we are not the cheapest.
Our rates and costs are very competitive, but we have also invested in the systems and team we need to ensure the top quality experience you deserve.
3) MAKE CORRECT COMPARISONS
When looking at estimates, looking only at the bottom line can be deceptive. Compare lender fees to lender fees, as these are the only ones the lender controls. And make sure lender fees are not “hidden” down amongst the title or state fees.
A lender is responsible for quoting other fees involved with a mortgage loan, but since they are third party fees – they are often under-quoted up front by a lender to make their bottom line appear lower, since they know that many consumers are not educated to NOT simply look at the bottom line!
What about APR? Easily manipulated as well, a government invented formula virtually worthless as a tool of comparison. To read an in-depth article on how "APR Can Cost You" by CNBC contributing editor Barry Habib Click Here.
4) UNDERSTAND THAT INTEREST RATES AND CLOSING COSTS GO HAND IN HAND
This means that you can have just about any interest rate that you want – but you may pay more in costs if the rate is lower than the norm. On the other hand, you can pay discounted fees, reduced fees, or even no fees at all – which comes at the expense of a higher interest rate. Either of these scenarios might be right for you, or perhaps somewhere in between. It all depends on what your financial goals are. A certified mortgage planner will be able to offer the best advice and options in terms of the balance between interest rate and closing costs that correctly fits your personal goals.
5) KNOW THAT INTEREST RATES CAN CHANGE DAILY, EVEN HOURLY
This means that if you are comparing lender rates and fees – this is a moving target on an hourly basis. For example, if you have two lenders that you just can’t decide between and want a quote from each – you must get this quote at the exact same time on the exact same day with the exact same terms or it will not be an accurate comparison. You also must know the length of the lock you are looking for, since longer rate locks typically have slightly higher rates.
As you can imagine, I wouldn’t be encouraging you to shop around if I weren’t pretty confident that I can give you a great value and serve you the very best… Click Here to Find Out For Yourself
Mary Jo Lachica, CMPSä
EduCenter
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